Axiata Calls On TIP to Fix Telco Cost Problem

One of the developing world's biggest operators runs up data service losses in Malaysia and is looking to the Facebook-led initiative for help.

Iain Morris, International Editor

November 14, 2019

5 Min Read
Axiata Calls On TIP to Fix Telco Cost Problem

AMSTERDAM -- TIP Summit 2019 -- Data is a costly business for Malaysian telecom giant Axiata.

In its domestic market, every gigabyte costs about $1.40 to "manufacture," says Gayan Koralage, chief strategy officer of Edotco, Axiata's towers subsidiary. That might not be a problem if service charges were high, but each gigabyte generates only 80 cents in revenue. "We are not breaking even yet," said Koralage during a panel at this week's Telecom Infra Project (TIP) Summit in Amsterdam.

The 2G voice business currently funds any losses, according to Koralage, but strip that away and the Axiata business could have a problem as customers start to use more advanced data applications.

"We cannot have the cost structure that steep. It cannot be 4,000 employees running the show," he said. "It has to be simplified, IP-based and cloud-based to bring down the cost to 25 or 10 cents."

Koralage and other service provider executives hope TIP can provide a technological answer. Established in early 2016, the Facebook-led group is trying to upend the market for telecom network equipment in the same way the Open Compute Project, another Facebook initiative, brought radical change in the data center space. Facebook's goal is to boost competition and lower equipment costs so Internet services can be launched economically in poorer communities. About half the world's population still lacks Internet access, says TIP.

That mission suits telcos like Axiata, which provide connectivity in emerging markets where disposable income remains low. Other service providers have grown frustrated with traditional suppliers such as Ericsson, Huawei and Nokia, which dominate the market for radio access networks (RANs). Those vendors, say their critics, have resisted the introduction of more open interfaces that would allow new rivals into the sector. TIP puts pressure on the giants and might unearth alternatives.

Indeed, TIP-backed technologies are now entering commercial deployments. In Peru, Internet para Todos, a joint venture between Facebook, Spain's Telefónica and two local investment banks, is building a 4G network with products developed by Parallel Wireless, a software company with just 500 employees. MTN, a pan-African operator, has gone even further, announcing a 5,000-site deal with Parallel Wireless this week. Altiostar and Mavenir are two other relatively small companies providing such open RAN products.

The focus is typically on rural communities.

"The revolution starts in economically challenged environments," says Steve Papa, CEO of Parallel Wireless. "Starting with AT&T and Verizon is not the wisest thing for this system because they grind you down with a long list of requirements."

But Koralage hopes the network "disruption" that happens in rural areas will eventually come to urban markets. "That is where the large population lives," he said when citing his per-gigabyte cost and revenue metrics. Currently, it is hard to provide a high-speed Internet service in Malaysia's capital city of Kuala Lumpur because the economics are not as favorable as they could be. If Internet access is a human right, as some now argue, then a violation is taking place, he says.

Righting that wrong will take more than just new technology, though. "We need to figure out what the commercial model will be," Koralage adds. "I am calling on vendors and operators to think differently. This is not something one person can fix or demystify."

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Having started with technology, TIP has been turning its attention toward business models and commercial arrangements. At this week's event, it launched an online marketplace called the TIP Exchange, where service providers can hunt for parts and vendors can advertise their goods. For companies with limited resources, the TIP Exchange could be critical.

Procurement may be a tougher challenge. Service providers are used to visiting the huge stores of Ericsson, Huawei and Nokia when buying products, rather than dipping into the specialist shops run by younger rivals. Mavenir has been trying to educate procurement staff at UK-based Vodafone, which it is supporting in open RAN trials, about dealing with smaller radio vendors, says John Baker, the company's senior vice president of business development.

"The commercial guys are key to all this," he says. "They have to learn to manage the supply chain again."

Encouragingly, the interest displayed by the likes of Axiata, Telefónica and Vodafone may help to reduce costs as investments start to flow. Radio prices range from $3,000 to $6,000 per unit and remain too high for many operators, says Baker, citing research carried out by Senza Fili Consulting on behalf of Mavenir. Vodafone is now developing reference designs for a standardized $1,000 radio that would operate with 1800MHz spectrum. Its goal is to have a commercial product by this time next year, says Yago Tenorio, the operator's head of network strategy.

"It is super interesting," says Gabriel Brown, a principal analyst with Heavy Reading, welcoming the spur Vodafone's efforts could provide to the market for white-box radios. The system is simple, he points out, but would suit a variety of deployment scenarios. And it could prove vital in developing and rural markets. For Koralage, the path to lower costs and data profitability may be starting to clear.

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— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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